Weaker players have disappeared while other businesses chose to merge with other peers in order to survive, and the concentration process will continue.

Italy´s private consumption growth is expected to slow down to 0.5% in 2017 after growing 1.4% in 2016. However, domestic demand for consumer durables is expected to remain stable, as retail sales are forecast to grow 1.9%, and inflation will increase only modestly, by 1.7%. Retailers’ profit margins are expected to remain stable.

Due to its dependence on real estate, the furniture subsector has suffered yearly declines until 2014. A rebound started in 2014, and in 2016 demand for furniture increased 2.2%, and will be further sustained in 2017 by new public incentives to support household consumption. In the household appliances segment sales grew 2.9% in 2016, also thanks to some public incentives, partially confirmed for 2017.

The consumer durables retail sector remains highly competitive, with a moderate to high level of fragmentation. Weaker players with poor financial strength have disappeared while other businesses chose to merge with other peers in order to survive. It is expected that the current concentration process will continue until a new market balance is found, considering that the average size of Italian retailers remains small compared to European peers.

Payment terms generally range from 60 to 90 days. Payment delays and insolvencies remained stable in 2016, and no major change is expected in 2017.

Our underwriting stance for consumer durables retail will remain generally open with, a more cautious approach towards the weaker players in the distribution chain, which often lack the critical mass for long-term survival in a highly competitive environment.